WASHINGTON - With regulators warning that rising losses on commercial real estate loans pose risks for US banks, senators asked yesterday for greater attention to be focused on vulnerable smaller banks.
The smaller, community banks are especially exposed to commercial real estate loans, which now pose the biggest challenge for many financial institutions and their overseers, Federal Deposit Insurance Corp. chairwoman Sheila Bair told lawmakers at a Senate hearing.
A year after the financial crisis struck with force, the stability of the banking system has improved but remains fragile, and commercial real estate lending is a key trouble spot, said Federal Reserve governor Daniel Tarullo.
With more than 7 million US jobs lost in the recession, office space has sat empty and developers have defaulted on their loans. Nearly $500 billion in commercial real estate loans are expected to come due annually over the next few years.
Bair said she has been discussing with Treasury Department officials the possibility of giving community banks greater access to federal funds under the $700 billion financial bailout program.
